Is Organization B an eligible employer and eligible for the Employer Health Tax exemption?

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Interpretation Letter 09-0072, August 2009

We refer to your letter dated XXXXXX, regarding whether your client, Organization B, is an eligible employer for purposes of the annual exemption allowed under the Employer Health Tax Act (EHT Act). I acknowledge receipt of Organization B’s authorization to deal with you in this matter.

The EHT Act defines an eligible employer to mean, in part, an employer that is not a person in the public sector, as described in clauses 1(a) to (i) and section 2 of the Schedule to the Social Contract Act, 1993, and not subject to tax under Part I of the Income Tax Act (Canada) for the year.

Clause 1(d) of the Schedule to the Social Contract Act, 1993 states that the public sector in Ontario consists of every university in Ontario and every college of applied arts and technology and post-secondary institution in Ontario whether or not affiliated with a university, the enrolments of which are counted for purposes of calculating annual operating grants entitlements.

Clause 1(g) of the Schedule to the Social Contract Act, 1993 states that the public sector in Ontario includes every corporation without share capital, the majority of whose members, directors or officers are members of, or are appointed or chosen by or under the authority of, an employer or employers described in clauses (a) to (d), and every wholly-owned subsidiary thereof.

From the information you provided, I understand that Organization B:

  • is a registered charity with one charitable number
  • is a corporation operating under Letters Patent in the Province of Ontario with a head office in the Municipality of XXXXXX
  • is a federation established by seven XXXXXX institutions in order to promote cooperation among themselves and with other XXXXXX institutions in Ontario
  • is not a XXXXXX institution and is not funded by the Government of Ontario
  • in the past has paid Employer Heath Tax (EHT) on the total remuneration of its employees because it was informed that it was not an eligible employer
  • is funded by an assessment of its members and other fundraising efforts.

The seven member XXXXXX of Organization B are federated with XXXXXX of which all are XXXXXX institutions in Ontario.

Organization B is required in its XXXX By-Laws to have 9 out of a total of 23 (9 out of 21, according to XXXX By-Laws) members of its board of trustees appointed by a group of employers described in clause (d) of the Schedule to the Social Contract Act, 1993. The other trustees are determined by elections from students, faculty members, and the general public upon nomination by the nominating committee. Since only 9 out of 23 members is less than a majority, Organization B is not considered to be a person in the public sector as described in clause 1(g) of that schedule. Therefore, it is our opinion that Organization B is an eligible employer for EHT purposes and is eligible for the exemption for all open tax years from XXXX onward.

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